This paper applies principles of the New Neoclassical Synthesis (NNS) to questions of international trade and financial adjustment. The analytical framework is a 2-country, 2-good, 2-period model designed to explore the behavior of the balance of payments, the terms of trade, and aggregate...

Credibility for low inflation is the cornerstone of an effective monetary policy. And public support for Fed independence is the foundation of that credibility. Fed intervention in foreign exchange markets creates doubt about whether monetary policy will pursue low inflation or exchange rate...